annual report annual r eport Britvic plc

Transcription

1 annual report 2015 annual report 2015

2 welcome to Britvic s 2015 annual report for the financial year ended 27 September 2015 In this report you can read an overview of our business and what we do, find information on our strategy and how we deliver it, how we have performed in the financial year and how we govern our business. 01 Strategic report 01 Performance highlights Sustainable business highlights 02 Chairman s introduction 04 Britvic at a glance 06 Our brands 08 Our business model 09 Our geographies 10 Our strategy 12 Key performance indicators 14 Chief Executive Officer s review 17 Chief Financial Officer s review 22 Sustainable business review 28 Our risks 02 Governance 32 Corporate governance report 34 Board of directors 43 Audit Committee 46 Nomination Committee 48 Remuneration Committee 48 Directors remuneration report 53 Annual report on remuneration 70 Directors report 73 Statement of directors responsibilities 03 Financial statements 76 Independent auditor s report to the members of Britvic plc 79 Consolidated income statement 80 Consolidated statement of comprehensive income/(expense) 81 Consolidated balance sheet 82 Consolidated statement of cash flows 83 Consolidated statement of changes in equity 84 Notes to the consolidated financial statements 128 Company balance sheet 129 Notes to the company financial statements 04 Other information 136 Shareholder information 138 Glossary Cautionary note regarding forward-looking statements This announcement includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Except as required by the Listing Rules and applicable law, Britvic undertakes no obligation to update or change any forwardlooking statements to reflect events occurring after the date such statements are published.

3 performance highlights GROUP REVENUE ,300.1m ,344.4m -0.6% EBITA MARGIN % % +100bps GROUP EBITA m m +7.1% UNDERLYING ROIC % % +130bps strategic report All numbers in the Chairman s statement, Chief Executive Officer s Review and Chief Financial Officer s Review in addition to those above, other than where stated, are disclosed before exceptional and other items and are presented on a constant currency basis. Underlying numbers exclude the impact of the equity placement in July. A list of definitions can be found on page 138 of the annual report. sustainable business highlights ADJUSTED EARNINGS PER SHARE p p +11.0% FREE CASH FLOW m m +0.4% BITC CR INDEX stars star AVERAGE CALORIES PER 250ML DIVIDEND PER SHARE p p +10.0% RECONCILIATION FROM ACTUAL EXCHANGE RATE TO CONSTANT EXCHANGE RATE 2014 actual exchange rate m Change m 2014 constant exchange rate m Revenue 1,344.4 (35.9) 1,308.5 Group EBIT (0.5) Profit before tax (0.4) Profit after tax (PAT) 99.9 (0.1) 99.8 PAT after exceptional and other items EBITA (0.8) Adjusted earnings per share 41.8 (0.1) 41.7 GREAT PLACE TO WORK % % governance financial statements other information Britvic plc Annual Report

4 strategic report Chairman s introduction Despite difficult market conditions, this past year has seen Britvic deliver a record EBITA of 171.6m, up 7.1%. Profit after tax of 112.5m has translated into underlying adjusted earnings per share* of 46.7p, an increase of 12.0%.The board is declaring a final dividend of 16.3p, bringing the full year dividend to 23.0p, a 10.0% increase on the previous year. We continue to remain fully committed to our progressive dividend policy and paying out 50% of earnings in dividends in the coming years. Performance review This year marks Simon Litherland s second full year as Chief Executive Officer. He and his team have continued to execute the strategy launched in 2013, and have now largely delivered the cost saving programme. In the annual report last year I highlighted the amount of change the organisation was undergoing, a major challenge for the company. Once again, the business as a whole has responded well to this challenge and has successfully executed our plans. Trading conditions have been difficult across all our core markets. In the UK, in particular, our customers, the supermarkets, are facing a variety of structural challenges. The weather has also had an impact, to our benefit in France, but it worked against us in both GB and Ireland, where the wet summer prevented us from delivering four quarters of revenue growth. The new PET line in Leeds is now close to being operational and marks the start of an investment programme to ensure the business is fit for purpose for the years ahead, with further investment in 2016 also announced. International expansion is a key element of the strategy. Progress in the USA has been slower than planned but it remains a priority and this summer we announced the acquisition of the Brazilian soft drinks company Empresa Brasileira de Bebidas e Alimentos SA (Ebba). This represents our first acquisition outside of Europe and whilst we are excited by the prospects for us in this market, the board recognises the current challenges that Brazil faces. I am reassured by the extensive due diligence undertaken prior to the acquisition and the funding structure in place that sees half of the consideration deferred until The board were very supportive of the acquisition and the raising of equity to part finance it. The board believes a prudent approach to the balance sheet is appropriate, giving the business the flexibility to undertake value creating projects, such as the supply chain investment programme. Our people I would like to thank all of our employees for their hard work and commitment throughout the year. We have continued to encourage employees to participate, where possible, in the share incentive schemes available. They offer significant rewards for much appreciated hard work and allow our people to share in the success of the business. The board In the past year, there have been some changes to the board structure with new appointments and departures. After 16 years with the business, John Gibney will retire in April John has made a remarkable impact on the organisation and has contributed significantly to the growth and development of Britvic. On behalf of the board I would like to thank John for his exceptional service and wish him all the best for the future. I am pleased to announce the appointment of Mathew Dunn, who joined us in September and succeeds John Gibney as Chief Financial Officer following the preliminary results on 25 November 2015, allowing a sensible transition period. He joins us from SABMiller plc, where he held the position of CFO of South African Breweries Ltd. The extensive knowledge and experience of both international markets and managing partnerships that Mathew brings with him will be invaluable in the coming years. * Underlying adjusted earnings per share excludes the impact of the share placement in July 2015, which increases the adjusted diluted EPS by 0.4 pence 2 Britvic plc Annual Report 2015

5 strategic report chairman s introduction continued making life s everyday moments more enjoyable strategic report Bob Ivell has been our Senior Independent Director since we floated in 2005 and his counsel has been steady and wise. He reaches the end of his tenure as an independent director at the AGM in January, however, the board has asked Bob to remain on the board until it is satisfied that it has identified a suitable successor to replace him. Meanwhile, John Daly will take over from Bob as Senior Independent Director and Chairman of the Remuneration Committee from the conclusion of the AGM. John joined us in January 2015 after a distinguished executive career, latterly as Chief Operating Officer at BAT industries. Lastly, Silvia Lagnado stepped down from the board in July. Silvia joined us last year and provided valuable insight and made a strong impact on the board. On behalf of the entire board I wish her the best of luck for the future in her new role as Chief Marketing Officer for McDonalds, based in the USA. We are currently in the process of identifying her successor. The AGM will be held at 11am on Wednesday 27 January 2016 at the offices of Nomura, 1 Angel Lane, London, EC4R 3AB and I look forward to seeing you there. governance financial statements other information Gerald Corbett Chairman Britvic plc Annual Report

6 strategic report Britvic at a glance Britvic s purpose is to make life s everyday moments more enjoyable. We offer a wide range of soft drinks to meet the many and varied needs of our consumers; at home or out and about, there is a great tasting, high quality Britvic brand for every occasion. making life s everyday moments more enjoyable The Britvic of today has come a long way from its mid-19th century origins in a chemist s shop in Essex. The British Vitamin Product Company set the standard in the 1930s when it started bottling fruit juice to provide an easy and affordable source of vitamins to the local community. Today Britvic is a leading international soft drinks company, with a strong heritage. We have operations in GB, Ireland and France and now Brazil, having acquired Empresa Brasileira de Bebidas e Alimentos SA (Ebba) on 30 September We have also been taking our brands around the world, exporting to over 50 countries and working with carefully chosen partners in countries including the USA and India to franchise our brands. We have an enviable portfolio of leading brands and strong market positions. In GB and Ireland, we are the number one supplier of still soft drinks and the number two supplier of carbonates. Robinsons has long been the UK s number one squash brand and J 2 O is the number one premium juice brand. Other brands like Tango, R Whites Lemonade as well as Britvic juices and mixers, are staples in UK shopping baskets or on a trip to the pub. Fruit Shoot is the number one kids soft drinks brand in the UK and is at the heart of our international expansion. In France we have the leading syrup brand, Teisseire, and Teisseire Fruit Shoot is now the number one kids juice drink. In Ireland, Ballygowan is the number one water brand, while MiWadi squash and the Club range are leaders in their categories. We are proud of our longstanding partnership with PepsiCo, which began in We make and sell a number of their brands, including Pepsi and 7UP in GB and Ireland, and are now partnering with PepsiCo as we roll out Fruit Shoot in the USA. We are equally proud of our people who are critical to our success. We are committed to building a great place to work and making Britvic an inspiring place to be for our employees. Britvic is listed on the London Stock Exchange under the code BVIC. Its market capitalisation at 27 September 2015 was 1.8 billion. 4 Britvic plc Annual Report 2015

7 strategic report Britvic at a glance continued strategic report governance financial statements other information Britvic plc Annual Report

8 strategic report our brands Kids Teisseire Fruit Shoot is the number one kids juice drink in France Fruit Shoot Hydro has been reformulated with reduced sweetness and acidity levels Family Robinsons was relaunched in 2015, with new flavours, improved recipes and stand out packaging MiWadi is Ireland s number one squash brand Adult In 2015 we introduced lightly carbonated, lower calorie J 2 O Spritz Purdey s is a multivitamin fruit drink which helps you feel rejuvenated Portfolio In our core markets we have a broad portfolio of carbonates and still brands including the brands that we bottle and market on behalf of PepsiCo. A selection of those brands is shown here. Pepsi Max is the UK s leading low sugar cola Club Orange is the number one Irish soft drink 6 Britvic plc Annual Report 2015

9 strategic report our brands continued In 2014, we stopped selling added sugar Fruit Shoot in the UK as part of our health commitments strategic report Teisseire is the leading syrup brand in France Squash d was voted Product of the Year 2015 in the drinks category Maguary and Dafruta are the leading dilute brands in Brazil Teisseire adds a dash of French flair to cold and hot drinks Ballygowan is the undisputed leader in the Irish bottled water market governance financial statements other information Britvic plc Annual Report

10 strategic report our business model Britvic sets itself apart from its competitors by our unrivalled combination of market leading brands and track record in innovation, our expert knowledge of the soft drinks market, longstanding and sustainable relationships with our partners, including PepsiCo, and a highly talented and committed workforce. We manufacture, market and sell both Britvic and PepsiCo brands in GB and Ireland, supported by dedicated commercial teams in both countries. In France, we manufacture, market and sell our own category-leading brands, as well as supplying private label juice and syrups. On 30 September, we completed the acquisition of Brazilian soft drinks company Ebba, which manufactures and sells the two leading liquid dilutable brands, Maguary and Dafruta, and has a growing presence in the ready to drink nectar category. Internationally, we work primarily in partnership with local companies through franchise, distribution or licensing arrangements to exploit the global potential of our kids, family and adult brands. In the USA, we have agreements with a number of Pepsi bottlers and in India we are partnering with the Narang Group. We also export Britvic products around the world and are a significant player in the travel sector. Our brands and innovations are built on the quality of our insight and understanding of the soft drinks markets in which we operate. We have a strong track record in innovation and our dedicated technical and consumer innovation teams are at the forefront of identifying consumer trends and new technologies to ensure that we deliver products that meet consumers evolving needs. Our marketing teams ensure that our brands are front of mind for our consumers. We are committed to building sustainable relationships with all our partners, from suppliers of raw materials through to the customers who sell our brands. We have developed an operating model which is based on the principles of simplicity, focus and accountability, to ensure we are cost-efficient and effective and can invest in the growth opportunities. All of this allows us to deliver value to our shareholders, our customers and partners, the consumers who buy our brands, the communities in which we operate and to our employees. GB, IRELAND AND FRANCE BRITVIC Manufacturing Raw materials full goods Marketing Distribution Customers Consumers INTERNATIONAL FRANCHISE BRITVIC PARTNER ACTIVITIES Manufacturing compound Marketing Transport to international partner Manufacturing Raw materials full goods Distribution Customers Consumers INTERNATIONAL EXPORT BRITVIC PARTNER ACTIVITIES Manufacturing Export to Raw materials full goods Marketing international partner Distribution Customers Consumers 8 Britvic plc Annual Report 2015

11 strategic report our business model continued MANUFACTURING Our operations MARKETING Responsible marketing CUSTOMERS Commercial relationships strategic report In GB we have factories in Leeds, Norwich, Rugby and East London. In the past year we have invested 25m in our Leeds factory, including a new flexible, high-speed PET bottling line. We have also announced investment in our Rugby and Beckton facilities. All our marketing activity is governed by a Responsible Marketing Code, which acknowledges that soft drinks should be consumed as part of a balanced diet and lifestyle and that we have a particular responsibility to children. We do not market our drinks to children under the age of 12. We pride ourselves on being a great company to do business with. We work in partnership with our customers to grow both their businesses and our own. In France we have factories in Crolles, Beziers, La Roche sur Foron and Nantes. In Ireland we have factories in Dublin and Newcastle West. We fully understand the impact our operations have on the environment and are committed to efficient and sustainable production, as well as the highest quality standards. our geographies We currently operate as four geographic business units: GB, France, Ireland and International. We report separately on each geography, with GB further segmented by stills and carbonates performance. We are committed to encouraging families to get more active together. In the past year we launched Fruit Shoot Mini Mudder in the UK, Ireland and the USA. For PepsiCo franchised brands in GB and Ireland we jointly fund and manage marketing campaigns, combining PepsiCo global collateral and local market activations. Creativity is at the heart of our business and our marketing activity and we have a track record of award-winning campaigns. FINANCIALS BY REGION Volume (million litres) GB 1,584.2 France Ireland International 41.3 Total 2,116.6 Revenue ( m) GB France Ireland International 52.1 Total 1,300.1 In the last year, we have been acknowledged by the annual Advantage survey of food and drink companies as the number three supplier in GB and number one in Ireland, a step change improvement on the previous year. Equally we value our relationships with our suppliers and are committed to long term, sustainable partnerships. As part of our responsible sourcing programme, all our partners are required to comply with our Ethical Business Policy and are subject to our annual audit programme. % SHARE BY REGION other information 100% % governance financial statements other information Brand contribution ( m) GB France 75.6 Ireland 44.2 International 16.9 Total % Britvic plc Annual Report

12 strategic report our strategy We have a clear strategy that is designed to realise our ambition to become the most dynamic, creative and admired soft drinks company in the world and supports our purpose of making life s every day moments more enjoyable. Generate profitable growth in our core markets We have well-established operations in GB, Ireland and France, with a broad portfolio of leading brands. However, we see opportunities to improve our participation in both soft drink categories and sales channels. For example, in GB the water category is fast growing and there is strong potential to increase the penetration of our Ballygowan water brand, which we launched last year. Innovation will also be a key driver of growth. Innovation is at the heart of our business and we bring to market new products that offer consumers drinks for their changing needs. We continue to focus on disciplined revenue management, such as maximising the effectiveness of our promotions. In GB and Ireland we partner with PepsiCo to manufacture, market and sell its range of brands including Pepsi, 7UP, Lipton Ice Tea and Mountain Dew. The combination of the Britvic and PepsiCo brands gives us the most balanced portfolio in these markets and will continue to be a key aspect of our growth plans. Key performance indicator net revenue growth Launch of Pepsi Max Cherry The Pepsi brand has continued to go from strength to strength in the past year. Pepsi Max, with its maximum taste, no sugar position, is an important part of our health strategy and in the past year we have introduced a new flavour, Pepsi Max Cherry. Pepsi Max is also a key part of the brand s sponsorship of the UEFA Champions League. J 2 O Spritz launch Earlier this year, we launched J 2 O Spritz, a low calorie, sparkling version of J 2 O, to give adults a more sophisticated soft drinks experience. Available in three flavours Pear & Raspberry, Apple & Watermelon and Peach & Apricot, the range has already proved popular with consumers. 10 Britvic plc Annual Report 2015

13 strategic report our strategy continued Exploit global opportunities in kids, family and adult categories We have a number of brands in these categories, which have strong growth potential in a number of international markets. Our approach to maximising the opportunity is twofold, either working with local partners through franchise, distribution or licensing agreements or making selective acquisitions, where we can acquire strong local brands and routes to market. Our priority is to deliver on the potential that we see for Fruit Shoot in the US and India and, of course, deliver the benefits from the acquisition of Ebba. Key performance indicator net revenue growth Fruit Shoot in the USA We have achieved national distribution of single serve Fruit Shoot in the past 12 months and are well-placed to accelerate the growth of this format in the convenience and gas channel. In addition we have now established our route to market to launch into the grocery channel next year. Ebba acquisition In July we announced the acquisition of leading Brazilian soft drinks company, Ebba. Brazil offers strong long-term growth potential, despite the short-term headwinds. It is the sixth largest soft drinks market globally, and the second largest liquid dilutes category in the world. We have acquired the two leading liquid dilutable brands, Maguary and Dafruta. We intend to increase investment to drive these brands in their existing and new categories and see opportunities to introduce Britvic brands into Brazil in due course. Continue to step change our business capability We recognise that we need the right people, with the right capabilities to achieve our vision and we continue to focus on developing a winning culture. Improving efficiency is a priority across the business, to enable us to focus our resources against the future growth drivers. We are committed to develop a best-in-class supply chain, which will deliver significant cost savings and unlock both revenue and margin growth opportunities. Key performance indicators EBITA margin growth, Great Place to Work survey Growth Performance Success In 2014, we launched Growth - Performance - Success (GPS), a new approach to performance management, learning and development and reward. GPS brings all of our core people processes and tools into one framework with a clear link to our vision, strategic goals and values. Every employee was supported with a multi-media approach to guide them, step by step through the process. We also designed and delivered in-house training and so far have supported 280 managers with this tailored in-house initiative. New Leeds production line We have invested 25m in the installation of a new PET line at our Leeds factory. The line will greatly improve productivity and marks the start of an investment programme to ensure the business is fit for purpose for the years ahead, with further investment planned for There will be clear environmental benefits, such as less waste and greater energy efficiency, as a result of the investment. Build trust and respect in our communities We acknowledge the responsibility we have to contribute to our local economies and society more broadly whilst minimising our environmental impact. We are embedding our sustainable business strategy across all our business units to ensure that we deliver a strong performance with integrity. Key activity in support of this ambition includes the approach we have adopted to address public health challenges and tackling the carbon emissions associated with our business activities. Key performance indicators Business in the Community CR Index, average calories per 250ml serve Robinsons relaunch with no added sugar Robinsons is the UK s market leading squash. This year we relaunched the brand introducing new flavours and new recipes, to ensure we have the best tasting squash on the market, as well as redesigning packs for better stand out on shelf. Given our commitment to play a leading role within the soft drinks industry to help address the obesity issue, we took the decision to no longer produce added sugar Robinsons. Minimising carbon emissions This year we continued to address our environmental impact by reducing our carbon emissions, both direct and indirect. We have successfully reduced our business travel emissions by 11%, reducing mileage and encouraging the use of greener, lower emission and electric vehicles. Our average fleet vehicle emissions (CO 2 g/ km), including light commercial vehicles, decreased by 5.2% to 117.7g/km since last year. We have also continued to offset our GB employee-related business travel, supporting a deforestation project in the Amazon rainforest. This project works with local communities to help preserve the biodiversity of this area of global significance. strategic report governance financial statements other information Britvic plc Annual Report

14 strategic report key performance indicators NET REVENUE GROWTH Definition Why we measure Performance Net revenue excludes the impact of foreign exchange rate movements. This measure reflects our performance in terms of our ability to participate in our markets effectively and to raise prices and/ or grow volume sold. Net revenue declined 0.6%, primarily reflecting the challenging conditions in GB. EBITA MARGIN Definition Why we measure Performance The basis point movement in operating profit before exceptional items, interest, tax and acquisition-related amortisation, divided by net sales, after excluding the impact of exchange rate movements. Improving operating margin is a key focus of the business and measures our ability to drive a positive mix and eliminate unnecessary cost. EBITA is preferred ahead of EBIT to allow for the impact of fair value amortisation that is generated when acquisitions are made. EBITA margin was 13.2%, an improvement of 100bps. This reflects our disciplined approach to cost management, given the challenging market conditions. EBITA Definition Why we measure Performance Earnings before exceptional items, interest, tax and acquisition-related amortisation. EBITA measures the operating profit for the group. EBITA increased to 171.6m, an improvement of 7.1%. This is primarily as a result of the disciplined cost management of the group underpinning profitability. ADJUSTED EARNINGS PER SHARE Definition Why we measure Performance Adjusted earnings before exceptional items, interest, tax and amortisation specifically related to fair value adjustments generated from acquisitions divided by the weighted average number of shares in issue. For reward purposes this measure is further adjusted for the impact of exchange rates and other factors not controlled by management, to ensure focus on our underlying performance drivers. Earnings per share reflects the profitability of the business and how effectively we finance our balance sheet. It is a key measure for our shareholders. Adjusted earnings per share was 46.3p, up 11%, reflecting the growth in EBITA of 7.1% and the benefit of a reduction of 3.2m in net interest costs. 12 Britvic plc Annual Report 2015

15 strategic report key performance indicators continued FREE CASH FLOW Definition Why we measure Performance Free cash flow is defined as net cash flow excluding movements in borrowings, dividend payments, exceptional and other items and proceeds from the share placement in July Free cash flow is a key indicator of the financial management of the business and reflects the cash generated by the business to fund payments to our shareholders and acquisitions. Free cash flow was 89.3m, an increase of 0.4% on last year. The improvement in EBIT and working capital was largely offset by an increase in other spend, including the timing of tax payments and the purchase of shares to satisfy share incentive schemes. strategic report RETURN ON INVESTED CAPITAL (ROIC) Definition Why we measure Performance Profit before finance charges and exceptional items divided by average invested capital. Invested capital comprises net assets aggregated with exceptional restructuring costs and goodwill at the date of transition to IFRS, excluding post-employment liabilities and net borrowings. making life s everyday moments more enjoyable Return on invested capital (ROIC) is used by management to assess the return obtained from the group s asset base. Improving ROIC builds financial strength to enable us to attain our financial objectives. Return on invested capital (ROIC) was 26.2%, an increase of 130bps. governance financial statements other information Britvic plc Annual Report

16 strategic reportr Chief Executive Officer s review In May 2013 I laid out a new strategy for the group, with a focus on driving growth in the kids, family and adult categories, where we have marketleading brands. In 2015 we continued to make good progress against this strategy, and delivered another year of excellent earnings growth. Generate profitable growth in our core markets Market conditions remained challenging across all our core markets. The retail landscape continued to evolve, with channels such as convenience, discounters, leisure and online benefiting at the expense of traditional, large supermarkets, where people are shopping less often. In addition, any increase in disposable income has not yet been reflected in their grocery spend on soft drinks. Consumers in all our markets are also more focused than ever on what they consume, with health and wellbeing increasingly important to purchasing decisions. With our broad portfolio, strong track record on innovation and a clear health strategy, Britvic remains well placed to respond to these trends. The weather this summer was particularly poor in both GB and Ireland, adversely impacting the soft drinks category, whilst in France the category, and syrups in particular, benefited from a very warm summer. In GB we have taken market volume and value share overall. Whilst our GB stills performance was disappointing, with a marginal loss of share, J 2 O and Fruit Shoot continued to grow and take market share. We launched a number of new products over the course of the year to capitalise on consumer trends and stimulate category growth. We introduced our leading French brand Teisseire to GB, with a range of premium syrups as well as formats for mixing with hot drinks and alcohol. We also staged a major relaunch of the Robinsons brand this year. As well as introducing a significantly better tasting formula and new flavours, we took the decision to remove the added sugar variant from the range as part of our health strategy. The relaunched Robinsons range now offers affordable, great tasting drinks containing on average just five calories per glass. Although the squash category has been in decline, and Robinsons has not been immune to this, I am confident that the work we have done to date, and will continue to do, will see the brand return to growth in the near future. Robinsons Squash d, the leading brand in the water enhancer category, was launched in 2014 and continues to capitalise on the growth of plain water, providing a great tasting way to hydrate on the go. In carbonates we introduced Pepsi Max Cherry, which has been very successful. Max contains no sugar yet retains the full taste of Pepsi. It has led growth in the cola category and contributed significantly to the Pepsi brand growing its volume and value market share. 7UP and Tango have also undergone a refresh this year with new pack designs and marketing campaigns. Through the strength of these brands, supported by our innovations, we gained volume and value market share in the total carbonates category. 14 Britvic plc Annual Report 2015

17 strategic report Chief Executive Officer s review continued In France, we have continued to outperform the total soft drinks market by a significant margin. Our syrup and juice brands, as well as Teisseire Fruit Shoot, have all taken market share. Five years on from the acquisition of the business, we have doubled profitability in France, despite difficult macro conditions. Innovation has been key to the growth this year with the Teisseire pump pack and a new large bottle Fruit Shoot sharing pack proving very popular with consumers. In Ireland, we saw the business return to revenue growth, although the particularly poor summer weather impacted our performance in the final quarter, after three successive quarters of growth. The market remained subdued and deflationary; however, we gained market share, a testament to the strength of our brands in Ireland. MiWadi, Ballygowan, Fruit Shoot and Club all gained share, and the business is now well positioned to deliver growth in the coming years. We have also agreed a ten-year extension with PepsiCo for the distribution rights for 7UP, Pepsi and Mountain Dew in the Republic of Ireland and Northern Ireland from 1 January Exploit global opportunities in kids, family and adult categories The international business unit has embraced significant change this year to create the right operating model to deliver our future ambitions. In the Netherlands, we ended a long-term third party distribution agreement and established our own commercial team to manage the relationship with retailers. In the short-term, this resulted in some one-off costs, including the repurchase of stock from the distributor, but we are already seeing the benefit of the change, with new customer listings. In the USA, we changed the compound formula we send to our bottling partners, to enable a significant reduction in order lead times. This resulted in a reduction in stocks held by the bottlers; however, it creates a more flexible and responsive model for the future. In May we announced that we were continuing to evaluate the merits of the route to market options for Fruit Shoot multi-pack to grocery stores. I am pleased to confirm that this review has been concluded and we have appointed Advantage Sales & Marketing (ASM) as our partner. They will facilitate the relationship with key retailers as well as provide market insight and manage the order to cash process for us. Good progress has already been made in our discussion with retailers, with a number of initial listings already confirmed for launch in the first half of The Pepsi network remains important to us and they will continue to distribute Fruit Shoot in all other channels, as well as manufacturing in-market. We are making good progress with single-serve Fruit Shoot, achieving a 17% market share in the convenience and gas channel. In the summer we announced the acquisition of Ebba, the leading manufacturer of liquid dilutes in Brazil. This provides Britvic with access to the sixth largest soft drinks market and the second largest liquid dilutes category in the world. Its two brands, Maguary and Dafruta, have a similar relevance to consumers as Robinsons, MiWadi and Teisseire in their home markets. The business has many similarities to the one we bought in France and it offers an excellent opportunity to create shareholder value in the medium-term. We recognise that economic conditions in Brazil are challenging, but our assessment is that we can deliver sustainable growth in the coming years. We have a clear plan to create value through reinvigorating the core concentrates category, accelerating growth in ready to drink nectars and introducing Britvic brands and innovation to the market. Continue to step-change our business capability People are at the heart of this business and our employees commitment has been unwavering over the last year. We have seen some changes to the executive team in the past year and we have recruited significant new talent to complement the team. John Gibney, our CFO, will retire in the spring of 2016 and I want to take this opportunity to personally thank him for the support he has given me since becoming CEO and also for his dedication to Britvic over the last 16 years. Replacing John is Mathew Dunn, who joined us from SABMiller, where he was CFO in South Africa. Mat has enjoyed a successful career in beverages across a number of continents, and also has extensive partnership and bottling experience. Also joining Mat on the executive team is Hessel De Jong, our new International MD. Hessel also has excellent beverage and general management experience in a number of markets, with companies such as Heineken and Coca Cola. Hessel replaces Simon Stewart, who has chosen to return to Australia with his young family. We wish Simon the very best for the future and thank him for his valuable service. Finally João Caetano De Mello Netto, who joined our business as a result of the acquisition of Ebba, joins the executive team, as Managing Director of Ebba. We have also recruited at all levels of the organisation, bringing in new talent and new ideas to complement the existing hugely talented team. I am confident that we have the right people in place and the organisational capacity to deliver our future growth ambitions. Consumers in all our markets are also more focused than ever on what they consume, with health and wellbeing increasingly important to purchasing decision. With our broad portfolio, strong track record on innovation and a clear health strategy, Britvic remains well placed to respond to these trends. strategic report governance financial statements other information Britvic plc Annual Report

18 strategic report Chief Executive Officer s review continued We have also announced a business capability programme to unlock revenue, margin and profitable growth opportunities. In 2016 we will be investing an additional 70m to 80m capital in our GB supply chain to start to create a best-in-class supply chain, generating a minimum annual cash return of 15% on an ongoing basis. This programme will provide us with additional capacity in growth packs, deliver cost savings, as well as enable us to participate more effectively in the evolving retail environment. Build trust and respect in our communities We have continued to make progress on our broad sustainability agenda, acknowledging the responsibility we have to be an active member of the communities in which we operate. Public health and obesity have never been higher on the agendas of government, NGOs and the media. I am proud of how we have positioned Britvic to be part of the solution in playing an active role in encouraging healthier lifestyles. Over the past few years, we have significantly evolved our portfolio and in 2014, we launched our 2020 health strategy. Last year, we took further bold steps to reduce the calorie content of our portfolio, including the removal of our added sugar variant of Robinsons. We also launched a number of innovations such as J 2 O Spritz and Club Zero, which are lower in calories. Read more about our health strategy and approach to sustainability on pages 22 to 27 of the annual report. Overall, I am delighted with the progress we have made this year and am equally excited by the opportunities we have to continue to build our business capability, grow our brands and deliver strong shareholder returns. Simon Litherland Chief Executive Officer 16 Britvic plc Annual Report 2015

19 making life s everyday moments more enjoyable strategic report Chief Financial Officer s review The following is based on Britvic s results for the 52 weeks ended 27 September All numbers quoted are on a constant currency basis and are pre-exceptional and other items, unless otherwise stated. Overview In the period the group sold over 2.1 billion litres of soft drinks, an increase of 0.9% on the previous year, with Average Realised Price (ARP) of 60.5p, declining by 1.5%. The group s revenue was 1,300.1m, down 0.6% compared to last year. The focus has remained on building sustainable profit and margin improvement with the delivery of the strategic cost initiatives underpinning the 7.1% growth in EBITA, to 171.6m, and the resulting 100 basis points (bps) improvement in EBITA margin to 13.2%. The strategic cost initiative benefits have been realised in both brand contribution and in fixed costs. The disappointing summer weather in GB and Ireland contributed to a revenue decline in these markets in the final quarter and was a significant drag on the full year performance. This was partly offset by the strong performance in France where the weather was particularly good this summer. strategic report governance financial statements other information Britvic plc Annual Report

20 strategic report Chief Financial Officer s review continued GB stills 52 weeks ended 27 September 2015 m 52 weeks ended 28 September 2014 m % change actual exchange rate Volume (millions of litres) (0.4) ARP per litre 85.2p 88.5p (3.7) Revenue (4.1) Brand contribution (5.2) Brand contribution margin 47.0% 47.6% (60)bps Stills performance this year was disappointing with both volume and ARP down, leading to revenue declining 4.1%. This was primarily due to the performance of Robinsons, which was impacted by both competitive pressures and our decision to remove the added sugar variant from the portfolio. As consumer trends move to better for you products, Robinsons is well-positioned to capitalise on the future growth opportunities. Both Fruit Shoot and J 2 O grew revenue and gained market share whilst the introduction of Ballygowan has resulted in strong growth in the plain water category. A number of new products were also launched this year to provide longer-term growth in the category, including Teisseire and J 2 O Spritz. GB carbonates 52 weeks ended 27 September 2015 m 52 weeks ended 28 September 2014 m % change actual exchange rate Volume (millions litres) 1, , ARP per litre 46.9p 47.1p (0.4) Revenue (0.4) Brand contribution Brand contribution margin 39.8% 39.2% 60bps Whilst full year revenue marginally declined, this was an out-performance of the carbonates category, as measured by Nielsen. Pepsi continued to see robust growth this year, and gained further significant volume and value share. The focus on the no-sugar Pepsi Max variant continued to be successful with the new cherry variant a key factor in the growth. Pack mix was also positive with single-serve packs in particular showing strong growth. Whilst we held share in fruit carbonates, revenue declined, outweighing the performance of Pepsi. Overall ARP declined 0.4% reflecting the impact of the competitive environment and brand mix. Brand contribution increased by 1.2% with margin expanding by 60bps. France 52 weeks ended 27 September 2015 m 52 weeks ended 28 September 2014 m % change actual exchange rate % change constant exchange rate Volume (millions litres) ARP per litre 83.2p 93.2p (10.7) (1.3) Revenue (5.7) 4.2 Brand contribution Brand contribution margin 31.5% 26.3% 520bps 510bps France benefited from the warm weather this summer during our fourth quarter, with syrups in particular showing strong growth. The customer environment was challenging with the emergence of retailer buying groups this year leading to significant pricing pressure, which was largely offset by favourable product mix. The continued focus on the kids and family categories, with a significant increase in A&P investment and the benefit of innovation launches, resulted in share gains in the syrups, juice and kids juice drinks categories. Brand contribution increased by 24.3% with margin expanding by 510bps. As well as the benefit of the positive brand mix there was the additional benefit of favourable raw materials and the move to in-market production for Teisseire Fruit Shoot resulting in significantly lower distribution costs. 18 Britvic plc Annual Report 2015

21 strategic report Chief Financial Officer s review continued Ireland 52 weeks ended 27 September 2015 m 52 weeks ended 28 September 2014 m % change actual exchange rate % change constant exchange rate Volume (millions litres) ARP per litre 49.7p 54.1p (8.1) (1.0) Revenue (6.2) 1.3 Brand contribution (6.0) 2.8 Brand contribution margin 36.7% 36.6% 10bps 50bps Note: Volumes and ARP include own-brand soft drinks sales and do not include factored product sales included within total revenue and brand contribution. Revenue in Ireland was up on last year for three successive quarters, with the poor weather across the summer contributing to a decline in quarter four. Full year volume increased by 2.6% whilst ARP declined by 1.0% leading to a revenue increase of 1.3%. The soft drinks market continued to be very competitive with deflationary pressure. International 52 weeks ended 27 September 2015 m Whilst the market was challenging we outperformed the market, gaining both volume and value share, with our own brand portfolio performing particularly well. The Counterpoint business also performed well. 52 weeks ended 28 September 2014 m % change actual exchange rate % change constant exchange rate Volume (millions litres) (6.8) (6.8) ARP per litre 126.2p 131.4p (4.0) (0.0) Revenue (10.5) (6.8) Brand contribution (19.5) (16.7) Brand contribution margin 32.4% 36.1% (370)bps (390)bps Note: Concentrate sales are included in both revenue and ARP but do not have any associated volume. During the year a direct route to market model was established in the Netherlands. This resulted in a one-off adjustment due to the re-purchase of stock from the previous distributor. In addition, there has been a reclassification from overheads to revenue of specific customer investment costs as a result of the change of business model. At the start of the year the USA compound model was Fixed costs altered to reduce the lead time on orders from our bottling partners. Both of these changes provide a platform for sustainable future growth. In-market performance in the USA was encouraging with retail sales value increasing by 23% over the previous year. Increased investment in A&P also contributed to the 16.7% decline in brand contribution. 52 weeks ended 27 September 2015 m 52 weeks ended 28 September 2014 m % change actual exchange rate Non-brand A&P (9.7) (9.9) 2.0 Fixed supply chain (92.6) (101.8) 9.0 Selling costs (118.6) (120.7) 1.7 Overheads and other (123.0) (126.4) 2.7 Total (343.9) (358.8) 4.2 Total A&P investment (71.1) (72.0) 1.3 A&P as a % of own-brand revenue 5.6% 5.4% (20)bps Fixed costs declined by 4.2% to 343.9m. During the year the residual benefits of the 2014 strategic cost initiatives were achieved, such as the benefits of the factory closures in GB and the consolidation of GB and Ireland back-office functions. We have further invested in the international business unit and the strategic marketing and innovation function. A&P spend marginally decreased by 1.3% to 71.1m, with the percentage of revenue measure increasing by 20bps to 5.6%. strategic report governance financial statements other information Britvic plc Annual Report

22 strategic report Chief Financial Officer s review continued Exceptional and other items In the period, we accounted for a net charge of 9.4m of pre-tax ( 8.7m post tax) exceptional and other costs. These include: Brazil acquisition-related costs of 6.5m Strategic restructuring costs related to the 2013 cost initiatives programme of 3.6m, within the original cumulative guidance of 29m Business capability programme adviser fees and business continuity costs of 1.4m Fair value gains of 0.9m Gains on disposal of property and assets of 1.2m. The cash costs of exceptional and other items in the period were 8.6m. Interest The net finance charge before exceptional and other items for the 52-week period for the group was 22.0m compared with 25.2m in the same period in the prior year, reflecting the lower debt profile of the group, the benefit of the increased free cash flow generation and the refinancing of the group bank facilities earlier in the financial year. Taxation The tax charge before exceptional and other items was 34.5m which equates to an effective tax rate of 23.5% (52 weeks ended 28 September 2014: 24.8%). The decrease in the effective tax rate reflects the decrease in the UK corporate tax rate during the period and the utilisation of trading losses in Ireland. In addition, the group has incurred further start-up losses in certain territories as a part of its international expansion, for which no tax relief is currently available. Earnings per share Adjusted basic EPS for the period was 46.3p. Adjusted underlying basic EPS for the period, excluding exceptional and other items and acquisition related amortisation, as well as the weighted average number of shares related to July share placing, was 46.7p, up 12.0% on the same period last year (41.8p). Basic EPS (after exceptional and other items charges post-tax) for the period was 41.8p compared with 36.5p for the same period last year. Dividends The board is recommending a final dividend of 16.3p per share, an increase of 10.1% on the dividend declared last year, with a total value of 42.6m. The final dividend will be paid on 5 February 2016 to shareholders on record as at 4 December The ex-dividend date is 3 December Cash flow and net debt Free cash flow was a 89.3m inflow, compared to a 88.9m inflow the previous year. Working capital was an inflow of 10.3m (2014: 1.6m outflow) as a result of a one-off change in supplier payment terms. Capital expenditure was 3.6m higher than last year, driven by the continued implementation of the strategic initiatives. Other spend increased by 17.1m and included 9.2m of own share purchases to satisfy share incentive schemes (2014: nil) and higher tax payments, largely driven by timing differences. Overall adjusted net debt reduced by 117m and took our leverage to 1.3x EBITDA from 1.9x last year. In July 2015, 87.8m cash was received from the issue of shares under a non pre-emptive placing, subsequently used in consideration for the acquisition of Ebba. The adjusted net debt (taking into account the foreign exchange movements on the derivatives hedging our US Private Placement debt) at 27 September 2015 was 263.9m, compared to 380.9m at the end of last year. Treasury management The financial risks faced by the group are identified and managed by a central treasury department, whose activities are carried out in accordance with board approved policies and subject to regular Audit and Treasury Committee reviews. The department does not operate as a profit centre and no transaction is entered into for trading or speculative purposes. Key financial risks managed by the treasury department include exposures to movements in interest rates and foreign exchange rates whilst managing the group s debt and liquidity, currency risk, interest rate risk and cash management. The group uses financial instruments to hedge against interest rate and foreign currency exposures. On 17 December 2014, Britvic plc repaid US$30m of notes in the United States private placement market (USPP) using surplus cash available at the time. The 2009 cross currency interest rate swap instruments, which had been designated as part of a cash flow hedge relationship against the future cash flows associated with this maturing portion of the 2009 notes, also matured on 17 December At 27 September 2015 the group has 902m of committed debt facilities consisting of a 400m bank facility which matures in 2020 subject to potential extensions to 2021 and a series of private placement notes with maturities between 2016 and 2026 providing the business with a secure funding platform. At 27 September 2015, the group s unadjusted net debt of 335.7m (excluding derivative hedges) consisted of 0.5m drawn under the group s committed bank facilities, 574.0m of private placement notes, 3.4m of accrued interest and 0.2m of finance leases, offset by net cash and cash equivalents of 239.6m and unamortised loan issue costs of 2.8m. After taking into account the element of the fair value of interest rate currency swaps hedging the balance sheet value of the private placement notes, the group s adjusted net debt was 263.9m which compares to 380.9m at 28 September Britvic plc Annual Report 2015